Macroeconomic forecasts have been revised down. Governments are rolling out economic stimulus packages. Businesses are set for more retrenchments and consumers believe 2009 will be like 1929, the year of the Great Depression. So how will Asia manage 2009?
One 1929 reform was to raise finance by selling national assets to foreign investors, which led to political unrest. Today, foreign investors tend to include government sovereign funds, which invest with a longer-term objective. Part privatisations of Asian state assets might have less political cost if investors are sovereign funds.
Another policy would be to promote greater intra-Asia trade and investment. China and India are two mega markets; developing countries such as Vietnam and Laos offer low-cost production. Hence south-east Asia is expected to play middleman, producing in cheaper locations and re-exporting to mega markets.
We expect to see more trade missions. Investment promotion agencies (IPAs) outside Asia can consider wooing Asian FDI to consider non-Asia locations with aggressive investment incentives. Likewise, Asian IPAs should find suitable non-Asian investors to diversify their investor base.
Cost cutting, reduced shift hours and worker retraining will continue to be common. Expatriate workers are likely to be laid off in favour of domestic employees. Asian workers and consumers are expected to tighten their belts.
Asians will be risk averse, high-saving and low-consuming until the storm blows over. As the Chinese proverb ‘qi lu zhao ma’ goes, practical Asians – expecting an ox – will continue riding a mule, while looking for a horse: settling for what they have while looking for something better.
Lawrence Yeo is CEO of AsiaBIZ Strategy, a Singapore-based consultancy that provides Asia market research and investment/trade promotion services.